Eco 372 - the Real Economy in the Long Run

The Real Economy in the Long Run

Patrick Jubrey, Chris Hinton, Kyle Thompson, Benjamin Johnston

ECO372

August 15, 2016

Thomas Westover

The Real Economy in the Long Run

As you know we have been looking to expand the growth in productivity at the Nike Corporation. We have projected a few ways in order to accomplish this task. We would like to start with building a new manufacturing plant in Tokyo, Japan. In this report we will discuss the factors that determine the country’s productivity, along with how Japan’s policies influence the growth of Nike’s productivity. We will also discuses Japan’s financial system and how it relates to key macroeconomic variables. We, Nike Corporation, can reduce and mitigate the risk of relocating, we will explain how. We will wrap this report up with how we will deal with the current and projected unemployment in Japan over the next five years.

Japan’s Productivity Factors

The factors that determine a country’s productivity is its GDP or Gross Domestic product. The GDP makes up the value of products in a certain period of time in that specific country. One of the easiest factor for us to use to determine Japan’s GDP is the labor cost. This year alone the unemployment rate was a little over 3% (Tradingeconomics.com, n.d.). Yet, that accounts more for part-time workers, instead of full-time employees. If we can see what the effects the labor cost has on the market in Japan we can determine if having a new Nike plant will change the productivity. Another factor of productivity is health care. Can we as a company offer a better health situation for our future employee? As we said earlier with part-time being the biggest part of the employment pie, is it economical for us to offer health care. Japan’s health care system is not the best either. It kind of mimics their employment scenario, with no main stream hospitals and more “mom & pop” health facilities. Lastly, the factor of construction and the use of the land will be a major factor. We would be adding jobs, temporarily boosting there economy, once complete can we maintain the amount of jobs that would be lost?

The productivity growth for the Japanese is steadily increasing, Reported by Trading Economics (2016) Japan’s productivity growth increased to 97.60 index points in May compared to 89.10 in April 2016. Over the past sixteen years Japan averaged about 90.19 on the index point. A forecast for Japan’s productivity for the year 2020 is projected to gradually drop to an average of 90.03. Even though Japan currently has good index points the future of its success will depend on the countries policies that affect the workforce.

One of the main reasons why Japan’s productivity growth has the potential to falter is mostly because Japan is running out of people. According to The Washington Post (2016) the 2010 census showed a population of 128,057,352, but the 2015 figure, released Friday, shows just 127,110,000. Japan's population had shrunk by almost 1 million people in five years. With the low birth rates and higher aged citizens one simple policy change the country could make to ensure Japans gross domestic product and it’s productivity doesn’t hit rock bottom is allow more people to immigrate to Japan. The country has very difficult and strict policies on allowing citizens from other countries to migrate to Japan. By allowing more foreigners to move to Japan it will help with its population gap that will affect its jobs industry.